Monday, May 26, 2008

Let's Grab Google's Gazillions

By Roben Farzad

Tough times we live in. Gas is at $3.80 a gallon, with milk not far behind. Mortgages and consumer confidence are curdling, while public coffers underfloweth: The city of Vallejo, Calif., just went broke. Whatever is a Presidential candidate to do?

Channel your inner Hugo Chávez, I say. The Venezuelan strongman has been blissfully expropriating the profits of oil companies. But back here in the U.S., even amid the embarrassing riches of $130 crude, Big Oil is no easy target. Just ask Valdez, Alaska, where all its Exxon oil spill money is.

So I hereby propose we smack a windfall-profits tax on, yes, Google (GOOG). A cartel unto itself, the Internet megaplayer wields a $180 billion market cap, has boatloads of cash, and enjoys Pablo Escobar-ian profit margins. Moreover, Google's "don't be evil" credo is an expired link. Its profiteering, in fact, brings pain to many—and cries out for the healing and justice of a targeted fiscal transfer. A results-minded taxpayer, I proffer this bill of particulars:

Google Promotes a Too-Free Press. As the ultimate dot-com toll collector, Google is the ultimate enemy of the journalism that we constitutionally cherish.

Digital convergence and Internet migration are certainly great phrases to stick in an annual report. But as far as journalism goes, these are utterly bankrupting ideas. "The notion that the enormous cost of real newsgathering might be supported by display advertising, or by the revenue-sharing of a Google search box on the side of the page, is idiotic on its face," says Craig Moffett, vice-president and senior analyst at Bernstein Research. Not that Google needs to care: By next year, it will either run or broker half of the world's $55 billion in online advertising. For every dollar of traditional ads it displaces, Google's intermediation kicks back mere nickels to content providers.

Although Google profits wildly in the process, it won't pony up the money to station and protect correspondents in Baghdad, nor will it pick up the martini tab when a reporter interviews a hedge fund manager's whistleblowing mistress.

Last year saw the largest cut in U.S. news staffs in three decades, with the online-only side failing to grow sufficiently to absorb all the jobs lost from print. The ad revenues and market values of U.S. newspapers and magazines have effectively been annexed by Google. Explains an investor at a large tech hedge fund: "They siphon it off everyone else but only spritz it back out every now and then." Case in point—Google's $1.7 billion purchase of YouTube cost more than half the value of the New York Times Co. (NYT) and twice that of McClatchy (MNI), owner of 80 papers. The waste. The insult.

Pity me, too. Thanks to Google, my professional destiny is to end up blogging in my bathrobe about, well, Google. Surely the inveterate fat cat could spring for my unemployment insurance.

Google Thumbs Its Nose at Soaring Food Costs. There are maize mobs in Mexico and rice riots in the Philippines. I've downgraded to USDA subprime beef. Google's staff, meanwhile, enjoys unlimited helpings of soy milk shakes, macrobiotic salad greens, and risotto-porcini omelets adorned in gold foil. Who says there's no free lunch (or breakfast, dinner, and all-day snackroom access)?

According to Silicon Alley Insider's Vasanth Sridharan, Google spends somewhere between $70 million and $75 million annually on feeding its 9,600 already well-paid employees at its Mountain View (Calif.) and Manhattan headquarters. Even the word "headquarters" does little justice to the in-your-face West Coast Googleplex, a campus of funhouses decked out with fitness equipment, a massage room, a baby grand piano, foosball and pool tables, free washers and dryers, and more entitlement than seen in all 73 years of the Social Security program.

How can Google afford its food tab? "Easy, of course," writes Sridharan. "Last year Google earned $4.2 billion."

Unless we tax away such profligacy, famished, price-gouged swing voters could storm the Googleplex—and the only thing awash in milk shakes would be that baby grand.

Google Stifles Innovation. All this largesse might be understandable if Google weren't so nefariously bent on snuffing out progress. As Google hoards 70% of the lucrative U.S. search market, the company is using its heft and excess cash to promote free for free's sake—a nihilist m.o. if there ever was one. We're all the worse for it.

Poor Microsoft (MSFT) has devoted decades and billions to bequeathing us Word, Excel, and the indispensable Vista. It repelled Netscape's pesky onslaught and beat back regulatory apparatchiks. In thanks, Google ate Microsoft's search lunch, flooded the system with its free, open-source Office alternative, and giggled diabolically when the house that Gates built failed to land Yahoo! (YHOO)

And have you seen YouTube lately? If Google is indeed the torchbearer for free, why hasn't it put some of its billions toward defending the site's once-glorious cache of pirated clips, instead of letting lawyers water it down? Maybe it's that Google is too busy partnering with Chevron (CVX) and BP (BP) on some solar-power project. Well, it takes a windfall profiteer to know one.

Ever the callous monopolist, Google has more money than it knows what to do with. I say that it's high time we took a chunk of it back.

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